Charges of commission fixing at Sotheby's dominate the headlines on a weekly basis, but another quieter yet potentially more damaging legal drama is unfolding behind the scenes for Sotheby's.

Santa Fe collector and dealer Al Luckett Jr., who lives and works far away from New York's Upper East Side, has filed eight individual claims against the auction house. They include breach of the duty of good faith and fair dealing, breach of fiduciary duty, negligent misrepresentation, damage to credibility, fraudulent inducement, and unfair trade practice, all stemming from his single-owner sale of Spanish Colonial furniture and religious art in winter 1998.

If the case, now under consideration by United States Federal Judge Leroy Hansen, presiding in Albuquerque, New Mexico, goes to trial and a jury rules in Luckett's favor on all claims, Luckett could receive damages in excess of $24 million.

The allegations alone are enough to give would-be consignors pause, even those who consider themselves bona fide experts in their chosen discipline. For one, the case lays bare the practice of offering high estimates and significant cash advances on sales in which the auction house does not have a specific expertise, only a broad one, which was the case in Luckett's sale. (Sotheby's positioned itself as a "global expert" able to develop the necessary sales vocabulary and knowledge in Spanish Colonial to promote the sale and educate the market.)

The case also highlights the relatively new practice of demanding global reserves, which in essence force consignors to acknowledge their lowest acceptable price for an entire collection. The Luckett situation also speaks volumes about the mechanics of auctioning historically relevant objects, which require bidder education, versus socially sanctioned material that is in vogue.

The Issue at Hand
Luckett netted $62,000 on the sale, after repaying a loan on a $1 million advance payment and $350,000 in auction-associated fees, which today are subject to claims under the current civil lawsuit facing Sotheby's. He says this is a fraction of what he could have earned selling the material himself. He also maintains the sale damaged his credibility as dealer and collector and devalued the unsold portions of the Spanish Colonial collection as well as his other collections. (On this score, it appears Sotheby's agrees. Post-auction, Sotheby's attempted to sell lots at a discount, claiming the sale proved that earlier estimates were unrealistic.) Luckett's own experts (sociologist Charles Smith, professor and economist Allen Parkman, and C.P.A. Brain Rowe) contend that Luckett lost $87,000 in revenues on 16 single-bidder items, and his overall missed opportuntity ranges from $691,759 and $1,773,050.

In brief, Luckett is attacking Sotheby's overall execution of the sale, manipulation of its sale estimate (Sotheby's pressured Luckett into reducing a $2 million low estimate to $1.5 million), and demand for a $1.5 million "global reserve" (the entire sale, not individual items, received a single reserve). According to Luckett, Sotheby's introduced the global reserve in its final loan agreement, but then agreed in November '98 to sell under a lot-specific reserve if Luckett would reduce the low-consignment estimate from $2 million to $1,580,000 as the low-catalog estimate. Inspite of this agreement, Luckett alleges that Sotheby's reenstated the global reserve two days prior to the auction. Luckett maintains that the lowered estimate and global reserve reduced his protection by $700,000 and turned his auction into a liquidation sale.

In the face of these accusations, Sotheby's hasn't buckled. It claims that the Luckett sale was a success, grossing $1.45 million. Sotheby's told AW that it has no interest in settling with Luckett and that it has filed a motion with the Federal Court Judge to dismiss the claims, to be ruled on by Judge Hansen. It contends that a later loan and consignment agreement, featuring an "inclusion" provision, superseded its initial sales pitch by department heads in fall 1998, including a 24-page, bound marketing proposal.

Inside the Auction
For the uninitiated, the posturing and maneuvering behind the scenes in the Luckett sale from "courtship" to conclusion are anything but run of the mill. According to a court-ordered settlement brief sent by Luckett's attorneys to New Mexico District Judge Robert J. DeGiacomo, Sotheby's began its courtship with multiple visits by its American Indian and Americana department heads and the enticing marketing and promotion proposal. Among the tempting provisions, Sotheby's offered "a single-owner sale catalog," "advertising in appropriate trade magazines," "an organized educational symposium," "special advance sales packages," "luncheons and dinners in our boardroom for important collectors," and other enticing and resource-intensive incentives.

Of two original $2 and $3 million estimates, which were later reduced to $1.5 million, the proposal read, "We want to stress that these estimates, are in our opinion, conservative and realistic, and would generate the most competitive bidding at auction."

In an interview with AW, Luckett said it was Sotheby's proposal, enthusiasm for the material, and promise to educate New York's museum and collector community that persuaded him to consign and accept the $1 million loan advance. Without the marketing and promotional provisions outlined in the proposal, Luckett now contends the consignment would have been too risky, and that he would have achieved greater values in privately negotiated sales, not New York at Sotheby's popular Winter Show, in which collectors are more versed in Eastern American colonial material.

"The original concept of the consignment was based on Sotheby's marketing, and on my expectation that Sotheby's could achieve certain levels of education and exposure, not only in the marketplace, but in the academic and institutional community," said Luckett. "Levels that I personally couldn't achieve, and thereby we could reach prices that were more in line with the historic significance, rarity, and level of quality that the collection represented.

"In the pre-consignment, pre-contract phase, Sotheby's did its best to appear to be professional, focused, capable, energetic, interested--all of those courtly characteristics that are generally associated with soliciting an opportunity to make a profit," said Luckett. "As soon as the material was shipped to New York, and the loan agreement was signed, and the money was advanced, their focus began to shift. My first indications of problems occurred when I got the first wave of preliminary cataloging slips...At that point, I didn't fully understand this separation between the solicitation phase and the follow through phase. What I did understand was that I was not getting what I had expected to get."

Luckett also alleges that Sotheby's made outward appearances of faith in the sale and its original high $3 million estimate, while internally expressing doubt. According to Luckett, this fact has been documented in depositions with 36 Sotheby's employees, conducted by Luckett's attorneys. Moreover, Sotheby's managing director William Ruprecht "was not happy with what he saw" when reviewing the loan approval documents, according to Luckett's brief. During the discovery period by Luckett's attorneys, a memorandum also surfaced, expressing doubts in the sale. "We do not know the depth of the auction market for this property. Accordingly, the advance carries a higher than normal risk," read the memo, as quoted in Luckett's brief.

Luckett further claims that Sotheby's diverted its attention to another sale, the Sax sale of "Philadelphia" furniture, after he delivered his material to New York and signed Sotheby's loan and consignment agreement, based on promises made in its marketing proposal. According to Luckett, the consignment and execution of the Sax sale, which included a guaranteed estimate of at least $8 million, stretched Sotheby's resources in its Americana and American Indian departments (six staffers and "floaters") to the point that it could not carry out his sale effectively.

"My collection was conceived as the cornerstone sale for Sotheby's Americana Department for the two weeks in January which are characterized as Americana Week," said Luckett. "What I was not made to understand was that, subsequent to consigning in my 250 lots, Sotheby's was going to seek to consign in another 2,500 lots which would complete with my lots for cataloging, attention, and focus, and that those 2,500 lots would also be consigned in where their performance was guaranteed. Therefore, their natural inclination was to focus departmental manpower on the area where the greatest liability existed."

He added, "Had they admitted in the beginning what their reservations and limitations were, I would have been put on notice that they were not equipped to handle the task, and that failure was assured. At that point, I would never have entered into the agreement."

Understaffing in November 1998 exacerbated problems, according to Luckett, as Sotheby's three-person Americana staff prepared for three January sales, the Luckett, Sax, and annual "Various Owner Sale." As stated in his brief, Luckett believes this prevented Sotheby's staff from developing a vocabulary in Spanish Colonial to carry out the proposal and delayed the delivery of his single-owner sale catalog (dubbed the "cornerstone" of Sotheby's marketing plan). The catalog was originally scheduled for mid-November, but Luckett maintains that some curators did not receive the catalog until January 6, days before the January 15 sale. As for the symposium, only students of the Sotheby's Institute attended. And at the actual sale, Luckett says the support staff borrowed his lighting for the Sax sale.

"As we revisit all of the issues that were considered during pre-consignment as being essential to a successful sale, everything that I demanded was addressed pre-consignment, but not followed up on," Luckett told AW. "Sotheby's is like a magician, they keep you watching one hand, while picking your pocket with the other."

In the Eye of the Beholder
To the same extent Luckett proclaims the sale a failure, Sotheby's declares it a success. "We are very pleased with the results that we achieved for Mr. Luckett," said Matthew Weigman, vice president of public relations at Sotheby's, "There literally was no market for this material." Weigman also stresses that Sotheby's would have reached the original low $2 million estimate, if Luckett had not refused post-auction offers on items, which Sotheby's discounted to generate interest.

Weigman disputes Luckett's claims that the sale was poorly executed or received as well. "We had museums purchasing the top lots in the sale," said Weigman. "In one step, the material went from something new, to something that has to be preserved for the public." He added that his staff worked much harder on the Luckett sale than the Sax event. "We got far more stories about the Luckett sale than the Sax sale." (Discovery sessions with the museum bidders by Luckett's attorneys suggest that the sale room was 80 percent empty.)

As for Luckett's interpretation of the Sax sale's effect on his own sale, Weigman said, "If the Sax sale had any effect it would have been to increase the number of people that saw his collection."

Jim Haas, Director of the Ethnographic Art Department at Butterfields, agrees that some lots in the sale actually did realize very respectable prices. "I noticed some prices well over the estimate for some of the best pieces," said Haas. "Particularly the most spectacular examples of the idiosyncratic New Mexican furniture style."

On a related note, Haas said that the sale's wide estimate ranges on individual lots were "indicative of a marketplace that was relatively unexplored at auction."

Some buyers did walk away paying far less than they budgeted. The biggest purchaser, David Turner, Director of the Taylor Museum at the Colorado Springs Fine Arts Center, bought two wooden chests, for which the museum budgeted $500,000. The hammer price for both was $200,000. Jonathan Fairbanks, former curator of the Museum of Fine Arts, Boston, said in a deposition that he would have paid up to $300,000 for a Trastero upright cabinet, which sold for $82,000, had he received the advance notice needed to solicit funding.

Moral of the Story
Accusations aside, Santa Fe Native American Art dealer Michael Kokin said he believes the biggest miscalculation on Sotheby's and Luckett's part was holding the auction in New York during the Winter Sale, in which the collecting set has an affinity for Eastern American colonial furniture. "I think Sotheby's made a terrible tactical error--that auction should have taken place in Santa Fe in August," said Kokin. "It was like an auction of sand in Saudi Arabia."

He said he does see a lesson, not to mention a trend, in the Luckett situation. "The Al Luckett case is a microcosm about what consignors should know about the auction galleries," Kokin said, emphasizing the need for consignors to understand the finer points of the auction negotiation process, including global reserve tactics. While not averse to consignment, he acknowledges that disputes like Luckett's are common. "I don't know anyone who sold at auction who was a real collector who went back a second time," said Kokin.

As for Luckett's chances in court, Kokin believes Luckett will not win on documentation alone. "He'll have to hope for a sympathetic jury," said Kokin.

Joshua Baer, another Santa Fe dealer in Native American art familiar with the case, takes the broad view. "The moral of Al Luckett's story is that even if you know your material extremely well, if you don't know your auctioneer and understand the auction process," said Baer, "you can still get hurt."

Luckett also had some advice for consignors: "The material in the Sax sale only required an aesthetic presentation. The social sanction was already in place, and for some sales it's not in place.

"If a socially sanctioned sale comes along, the historically relevant one goes out the window," said Luckett.